Hertz Global Holdings Inc.'s $2.6 billion purchase of Dollar Thrifty Automotive Group Inc. will increase total debt by as much as 28 percent and delay the junk-rated company's long-sought ascent to investment grade.
Hertz obtained $1.95 billion in financing to support its buyout and will assume $1.6 billion in Dollar Thrifty's obligations. Park Ridge, New Jersey-based Hertz's credit-default swaps, which rise as confidence in a borrower's creditworthiness diminishes, increased 6.6 basis points yesterday, according to data provider CMA, which is owned by McGraw-Hill Cos.
Hertz Chief Executive Officer Mark Frissora said on an Aug. 27 conference call that achieving an investment-grade rating was still the company's "ultimate goal," even as the acquisition boosts its debt to 4 times earnings before interest, taxes, depreciation and amortization. Standard & Poor's placed its B+ rating on the second-most leveraged U.S. auto-rental company on watch for a possible reduction, citing the increase in debt.
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